OECD Economic Surveys: New Zealand

OECD’s periodic surveys of the New Zealand economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

This Survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of New Zealand were reviewed by the Committee on 22 April 2015. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 15 May 2015.The Secretariat’s draft report was prepared for the Committee by David Carey and Corinne Luu under the supervision of Peter Jarrett. Secretarial assistance was provided by Mee-Lan Frank, Dacil Kurzweg and Krystel Rakotoarisoa and statistical assistance by Isabelle Duong.The previous Survey of New Zealand was issued in June 2013.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at www.oecd.org/eco/surveys.

The NZ economy has performed well over the past few years, having achieved relatively strong GDP and employment growth. However, some constraints to sustaining this momentum beyond the short term are emerging in the fields of skills, housing and urban infrastructure. Skills shortages have risen most in construction trades and management occupations. Housing shortages are most severe in Auckland, reflecting supply constraints in the face of population increases. As a result, prices are rising, reducing affordability. Urban infrastructure, particularly for road transportation, is also strained. In this respect, policy has a role to play in expanding economic capacity by reducing supply-side constraints and fostering productivity growth. At times New Zealand’s fiscal policy has been expansionary during upturns. Ensuring that permanent spending or tax cuts are implemented in a sustainable manner would encourage the strong fiscal position that New Zealand needs to meet potentially large macroeconomic shocks and long-run ageing-related costs.

New Zealand generally performs well in terms of economic and social inclusion. It has high employment rates, and education and health-care systems work well for most. However, some New Zealanders are stuck on low incomes and face material deprivation and multiple barriers to economic and social participation. The ranks of those falling behind increased in the wake of the economic reforms in the late 1980s and early 1990s, which succeeded in halting the decline in GDP per capita relative to the OECD average but contributed to large increases in income inequality and poverty that have only been partially reversed since then. These developments have been aggravated by the rising burden of housing costs on low-income households. Māori, Pasifika and low-income households have also experienced slower rates of improvement in many health and education results. NZ governments have made improving outcomes for disadvantaged groups a top priority in recent years. Reforms are being made to facilitate the transition of welfare beneficiaries into work, increase the supply of affordable and social housing and enhance health and education outcomes for disadvantaged groups. These reforms go in the right direction and, in many cases, would be more effective still if complemented by other reforms.